Question

Cash The service company Falcon Footballs, Inc. (FFI) had the following balances as of December 31, 2019. $120,000 Land $ 21,000 Notes Payable $ 50,000 Accounts Receivable $ 78,500 Unearned Revenue S 44,800 Accounts Payable $ 5,400 Supplies $ 6,500 Utilities Payable $ 1.550 Salaries Payable $ 3,300 Prepaid Rent $ 70,000 Office Equipment- Common Stock $ 145,000 Office Equipment $ 68,000 Accum. Depn. S 24,500 Retained Earnings $ 89,450 During 2020, FFI engaged in the following transactions: 1. Issued common stock for $35,000 cash. 2. Performed $575,000 of services during the year: S355,000 for cash and $220,000 on account. 3. Purchased $17,200 of supplies on account. 4. Collected $227,700 of accounts receivable during the year. 5. Paid $163,000 for salaries during the year. 6. On June 30, paid $14,000 on the note payable (see opening balances above). The note payable in the beginning balance has a 6% interest rate. It is a five-year note that was borrowed in 2017 and will be repaid in 2022. Interest is paid annually. Any additional amounts paid are applied to the principal balance. FFI last paid interest on December 31, 2019. 7. Paid $18,600 for utilities during the year. 8. Incurred miscellaneous operating expenses on account, S143,000. (Note: Do not use Accounts Payable. Create a new liability account.) 9. Paid $104,400 of the miscellaneous operating expenses in item 18. 10. Paid $18,700 for supplies previously purchased on account. 11. On November 1, renewed annual rent agreement for $86,400 (cash was paid on that date). The previous year's rental contract expired on October 31 (see opening balances above). All rental agreements are annual. 12. Purchased land for $72,000. 13. Paid cash dividends of $9,800 to the owners. 14. On December 31, paid advertising costs of $20,400. The advertising campaign included TV and print ads running November through January 31, 2021. Management believes the advertising will influence customers through March 31, 2021. Adjusting Entries 15. Adjusted $7,500 for depreciation on office equipment 16. Recognized revenue from the unearned revenue in the opening balances above. The unearned revenue relates to an 18-month contract started September 1, 2019. $57,600 was received on that date. Services are provided evenly over the life of the 17. Accrued interest on the notes payable discussed in item 16, 18. Received a $1,875 bill for December utilities. The bill will be paid in 2021. 19. Adjusted for the rent agreement discussed in II. 20. Accrued salaries on December 31 were $6,900. 21. On December 31, a physical count of supplies indicated there was $4,700 of supplies remaining, Required: Analyze the transactions above using the financial accounting template. Record the transactions in general journal form. Post the transactions to the T-accounts provided. After posting all regular and adjusting entries for the year, prepare a trial balance. Use the trial balance to prepare closing entries and financial statements. FFI's financial statements must be prepared for the year ended December 31, 2020. You must create a Classified Balance Sheet, Multi-step Income Statement, Statement of Ownership Equity, and Statement of Cash Flows. contract

Answer 1

Opening Balance Sheet as at 31.12.2019 Liability Amount $ Assets Advances Received 44,800 Cash Utilities Payables 1,550 Account Receivable Notes Payable 50,000 Prepaid rent Accounts Payables 5,400 Office Equipment Salaries Payable 3,300 Acc Depreciation Retained earnings 89,450 land Common Stock 1,45,000 Supplies 3,39,500 Amount $ 1,20,000 78,500 70,000 68,000 (24,500) 21,000 6,500 3,39,500

Income statement for the period ending 31.12.2020 Expenses Amount $ Income Amount $ Opening Supplies 6,500 Revenue 5,75,000 Purchases 17,200 Closing Supplies 4,700 Gross Profit 5,56,000 5,79,700 5,79,700 Salaries 1,66,600 Gross Profit 5,56,000 Utilities 18,925 Interest on Notes 2,370 Miscellaneous 1,43,000 Rent 86,400 Dividend 9,800 Advertisement 13,600 Depreciation 7,500 Profit 1,07,805 5,56,000 5,56,000

Closing Balance Sheet as at 31.12.2020 Liability Amount $ Assets Advances Received 44,800 Cash Utilities Payables 1,875 Account Receivable Notes Payable 36,000 Prepaid rent Accounts Payables 3,900 Office Equipment Salaries Payable 6,900 Acc Depreciation Retained earnings 1,97,255 land Miscellaneous 38,600 Prepaid Advertisements Common Stock 1,10,000 Supplies 4,39,330 Amount $ 1,58,030 70,800 70,000 68,000 (32,000) 93,000 6,800 4,700 4,39,330

Cashflow Statement Opening 1,20,000 Revenue 3,55,000 Collection 2,27,700 Total Receipts 5,82,700 Salaries 1,63,000 Utilities 18,600 Note Repaid 14,000 Misc 1,04,400 Payables Paid 18,700 Rent 86,400 Land 72,000 Dividend 9,800 Advertisement 20,400 Interest on Notes 2,370 Stock 35,000 Total Payments 5,44,670 Closing Cash Balance 1,58,030